Archive for May, 2011

In a welcome addition to the glut of forecasts regarding Internet traffic growth, a recent report from Informa noted radically different levels of traffic consumption in two markets recognised as being leaders in the adoption of super-fast broadband.

South Korea and Japan both have strong FTTH penetration and users in South Korea consume more bandwidth per head than any other country. But, in Japan, consumption is less than 40% that of South Korea, despite access to broadly similar levels of high-speed connectivity.

According to the research, users in Japan tend to use their mobile devices for accessing the Internet rather than their fixed line, leading to lower consumption across fixed connections. While this eases congestion issues, it is not good news for providers of fixed networks seeking to monetise their networks.

Boosting demand for services is critical to this goal and fixed operators also need to be sure that they deliver attractive services to ensure uptake is maximised. Failure to do so may mean more users migrate to mobile Internet access, particularly as higher-bandwidth 4G technologies enter service. This will require creativity and differentiation. The question of how operators can achieve that level of differentiation in the face of competition is vexed.

One thing’s for sure, the deployment of end-to-end policy solutions is a step in the right direction. But, while much of the focus on the emerging policy market has been on mobile operators, fixed operators need to move equally rapidly to ensure they remain
competitive.

A recent viewpoint from Arthur D Little on mHealth opportunities suggested that there are a number of key technological capabilities that are required to successfully launch mHealth services. These included:

Scalable network architecture
Agile service layer

Network scalability is going to be increasingly important. As the number of potential endpoints increases, so too will the quantity of data that flows across the network. And, there will be a need to aggregate data from different sources, particularly if more remote connections are being served through areas with limited or constrained bandwidth.

Similarly, the agile service layer must be capable of responding to changing demands of specific applications and services, reserving more bandwidth when required or releasing them when they are no longer needed. The mHealth network of the future must be able to:

Aggregate critical streams of data
Differentiate between data that is critical and data that is not

These are capabilities that the MNO can use to add value and avoid being treated as a “bit pipe”. The question is, how can this be achieved?

Operators need to think themselves out of the capacity crunch, not bite the hand that feeds them.

There’s been much heated debate recently over the notion that European mobile operators might seek to levy charges on content providers such as Facebook and Google. Operators are heard to complain that the huge growth of data traffic on their networks is driven in large part by users accessing sites like YouTube and Facebook on the move, clogging up their airwaves and reducing data access to a crawl. Content providers shouldn’t be allowed to use the mobile networks for free (so goes the argument), they should instead pony up some cash and share the cost of delivery.

It’s a point of view that raises a lot questions and elicits some fairly strong reactions. Some would argue that this is a logical move for the operators, that content providers free-ride on a scarce resource and should contribute to its cost. Others think that it’s a lazy, short term solution. In their view, Google, Facebook et al did the operators a massive favour in supplying the sort of content that people actually wanted to access in the first place, if the operators are struggling to monetise this demand then that’s a problem for them. It’s a problem they have to innovate their way out of, throwing a tantrum at Google will not help.

Wherever you sit in the debate, there are alternatives to charging upstream providers that might be much easier to implement. But, this requires innovation on the part of mobile operators rather than confrontation with content providers who, let’s face it, are best placed to provide things that users want to access in the first place.

Be careful what you wish for…

MNOs spent a long time waiting for data traffic to come along. Now it’s here with a vengeance and it’s up to them to work out how to monetise it. So, what can they do?

Well for a start they can look at leveraging their policies more effectively. In the long-term, the application of network policies represents an outstanding opportunity to create value for subscriber and operator. It’s not just that flat-rate pricing plans are costing MNOs money, it’s that pricing plans and services can be differentiated according to policies that attract higher revenue.

This is going to be a dynamic market. Once network-wide policy control is in place there will be significant potential for operators to price for innovative services and to do so in ways that reflect usage. Changing consumer price models so that charges actually reflect usage and demand is intelligent billing. Of course we still have the challenge of how to package and market this capability – 2 slices of Facebook and a quarter of an ounce of YouTube per month sir? Surely that’s preferable to charging by the MB. It’s potentially a much more elegant solution and one that subscribers would be actually able to understand. How to position and bundle the services might be complex but that’s a problem for the haircuts in Marketing and there’s plenty of room to innovate.

It’s not a massive leap to go to from policy driven pricing to individually tailored, personalised tariffs. Instead of lamenting the traffic that YouTube generates, the forward thinking MNOs should be looking at the habits and history of individual users, coming up with unique offers that provide real value to the subscriber and push ARPU by encouraging users to use the services that we know they like. Personalisation that reflects my habits, movements and history can only come about through convergence of the network policy infrastructure and data mined from CRM and other databases. While that’s beginning to happen, it still needs wholesale convergence of a number of different elements that are hard to connect. There also are data privacy issues here that need thinking through and the recent uproar over smartphone location tracking and the Playstation Network debacle won’t increase public confidence over data security.

So, there are lots of potential solutions but MNOs need to act boldly here and see this as an opportunity, not a problem that can be solved by nagging for a payout from content providers.

Policy may unlock the door to upstream charges, creating a win win

MNOs spent a long time lamenting the absence of non-voice traffic on their networks. Now they have it and it’s up to them to wring some revenue from it. But, intriguingly, once effective policy control is in place, fully integrated with efficient network and data analytics, it raises the possibility that MNOs will have a genuine offer to take to content providers.

If they can dynamically offer different levels of service on a per user or per application basis, it will create real value and there may be potential to offer this capability to upstream providers. Instead of best-effort access to users, content providers might just be interested in paying a little bit more to ensure delivery of premium services to users who are also willing to pay: now that really would be innovative, but it depends on MNOs proving that they can offer more than just access to desirable content over their networks.